5 Credit Mistakes You Should Never Make: Insights from Marc Louvet

 

In today’s financially-driven world, managing credit wisely is crucial for maintaining financial health and achieving long-term goals. However, many people make common mistakes that can have lasting negative effects on their credit scores and overall financial well-being. Drawing on the expertise of financial advisor Marc Louvet, here are five credit mistakes you should never make.

1. Ignoring Your Credit Report

A big factor in figuring out your credit score is your credit report, which is an extensive account of your credit history. Ignoring your credit report is among the most serious errors you can commit. You may find and fix inaccuracies in your credit report, keep an eye out for fraudulent activity, and learn how your financial actions affect your credit score by routinely reading your credit report. Checking your credit report at least once a year is crucial, according to Marc Louvet. By being proactive, you can assist in guaranteeing that the credit data you provide is correct and current.

2. Making Late Payments

Payment history is one of the most significant factors in your credit score, accounting for about 35% of the total calculation. Consistently making late payments on your credit cards, loans, or other bills can severely damage your credit score. Marc Louvet emphasizes the importance of paying your bills on time, every time. Setting up automatic payments or reminders can help you stay on track. Even one missed payment can stay on your credit report for up to seven years, so timely payments are crucial for maintaining a healthy credit score.

3. Maxing Out Your Credit Cards

Using too much of your available credit is another common mistake that can hurt your credit score. Credit utilization, which is the ratio of your credit card balances to your credit limits, accounts for about 30% of your credit score. Marc Louvet advises keeping your credit utilization below 30% of your total available credit. Maxing out your credit cards or carrying high balances can signal to lenders that you are over-reliant on credit and may have difficulty repaying debt. Paying down balances and keeping your credit utilization low can positively impact your credit score.

4. Applying for Too Much Credit at Once

Each time you apply for credit, a hard inquiry is recorded on your credit report. While a few inquiries over time won’t significantly impact your credit score, multiple inquiries in a short period can lower your score and make you appear financially unstable. Marc Louvet recommends spacing out credit applications and only applying for credit when necessary. This cautious approach helps preserve your credit score and demonstrates to lenders that you are a responsible borrower.

5. Closing Old Credit Accounts

While it might seem like a good idea to close old or unused credit accounts, doing so can harm your credit score. The length of your credit history accounts for about 15% of your credit score. Closing old accounts can shorten your credit history and reduce your overall available credit, negatively impacting your credit utilization ratio. Marc Louvet suggests keeping old accounts open, even if you don’t use them regularly. Instead, focus on managing these accounts responsibly to maintain a longer credit history and a better credit score.

Final Talk

Managing credit wisely is essential for financial health and stability. Marc Louvet’s insights highlight the importance of proactive and responsible credit management. Implementing these practices will not only improve your credit score but also enhance your overall financial well-being. Remember, a healthy credit score opens doors to better interest rates, loan approvals, and financial opportunities.